NEIGHBORHOOD REPORT: MIDTOWN

NEIGHBORHOOD REPORT: MIDTOWN; Domino Real-Estate Deal Cleared

By BRUCE LAMBERT

Published: August 6, 1995

A final obstacle has been removed to a complex deal to relocate both the City University Graduate Center and the State University College of Optometry in a $173 million project involving the old B. Altman department store and two other sites.

In a three-year process, the college will move from 315 Park Avenue South at 24th Street to CUNY's building at 33 West 42d. CUNY will move to the Altman building, on Fifth Avenue at 34th. To allow the deal, Gov. George E. Pataki signed a special law cutting off state funds for the optometry college's $7 million annual rent, breaking its lease without penalty or compensation to the landlord. Mr. Pataki's press office did not respond to a reporter's inquiries.

The law is under attack from State Comptroller H. Carl McCall, some real estate industry leaders and the owners of 315 Park. The owners, TM Park Associates, say the move could bankrupt them, since their $50 million mortgage is based on the lease's lasting till 2004. They plan to sue. Mr. McCall's office called the law unprecedented and said it could have serious consequences, hampering future lease negotiations.

"The concept that the state can simply abrogate a contract seems to me unfair, unethical and immoral -- you and I could not get away with that," said Michael Cohen, president of Williams Real Estate, which has several leases with state agencies. He called the law a terrible precedent.

Controversies aside, officials at the optometry college and CUNY Center say they are delighted at the prospect of new homes. CUNY, which opened in 1961, long ago outgrew its 172,924-square-foot 42d Street building and spilled over into 100,831 square feet rented in adjacent buildings.

"We're really cramped," said Pam Bayless, a spokeswoman. "The hope is to get out as soon as possible."

Despite agitation within the Real Estate Board of New York to oppose the lease-breaking law, the industry organization has not done so. Some critics say that reflects the influence of Peter L. Malkin, a governor of the board and a real estate power who is a general partner in the redevelopment of the Altman site. He did not respond to a request for an interview.

The CUNY move is the third time Mr. Malkin's partnership has benefited from special legislation and public money to help rescue the troubled Altman project and fill it with new occupants and owners.

After the store closed in 1989, the partnership tried to convert the building into the New York Resource Center, a mart for the office furnishing industry. But that flopped as the city sank into recession. Then the partnership tried dividing the building into condominiums for nonprofit institutions who, by owning, would avoid property taxes.

Senator Roy Goodman, who is also the Manhattan Republican Party chairman, sponsored the lease-breaking law and also introduced an earlier bill that helped land the Altman building's first occupant. That legislation enabled the State Dormitory Authority to finance $30 million for Oxford University Press to buy 110,000 square feet in the top five floors of the building's eastern end, facing Madison Avenue. Oxford moved in this year. Mr. Goodman was out of town last week and unavailable for comment.

The Dormitory Authority is also helping finance a $125 million project creating the Science, Industry and Business Library in 213,000 square feet on the lower eight floors of the Madison wing, scheduled to open later this year. CUNY's move, also authorized by state legislation and financed by public funds, will fill 375,000 square feet of Altman's remaining space, making CUNY the building's major occupant. BRUCE LAMBERT